Case report – eBay’s request for stay of PowerSeller production order rejected by FCA

2 May

On April 17th, the Federal Court of Appeal rejected an application for a stay of an order that requires eBay to provide the Minister of National Revenue with the names, basic account information and gross annual sales of eBay’s Canadian resident “PowerSellers” for 2004 and 2005.

The information was ordered to be produced under the authority of section 231.2 of the Income Tax Act, which authorizes third-party production orders that allow the MNR to seek information about persons or ascertainable groups of persons where the order is made to verify compliance with the ITA.  After last November when the Federal Court of Appeal held in Greater Montreal Real Estate Board that this provision did not require the MNR to establish that each and every one of the individuals targeted to be the subject of a “genuine and serious inquiry,” Hughes J. of the Federal Court affirmed the eBay production order.

The Federal Court of Appeal rejected eBay’s motion for a stay of Hughes J.’s order pending its appeal based on an application of the R.J.R.-MacDonald three-part test.  Sharlow J.’s key finding was that eBay did not prove irreparable harm. Although she acknowledged that information cannot be undisclosed, she held that harm to individual eBay account holders rather than eBay itself could not justify a stay.  This somewhat remarkable finding was despite “some material” on the record about eBay’s contractual relationship to account holders.

The record contains some material from which it could be inferred that eBay Canada has contractual obligations to eBay Inc. not to disclose certain confidential information without the consent of eBay Inc. It is not clear that the information sought by the Minister about PowerSellers is confidential information as contemplated in those contracts. Even if the information about PowerSellers is confidential information under those contracts, it is not clear that eBay Canada’s obligation not to disclose confidential information would or could be breached by the disclosure of information pursuant to a court order (even a court order that is under appeal). And, even if such a breach would or could result from such a disclosure, there is no evidence that any harm would come to eBay Canada as a result.

Coincidentally, the application for leave to appeal to the Supreme Court of Canada in Greater Montreal Real Estate Board was just dismissed on April 24th.

eBay Canada Limited v. Canada (National Revenue), 2008 FCA 141 (CanLII).

 

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One Response to “Case report – eBay’s request for stay of PowerSeller production order rejected by FCA”

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  1. Case Report - SCC says CRA may audit one taxpayer through another « All About Information - August 3, 2008

    […] to be given a meaningful role in the enforcement scheme. It seems to me that the eBay case (see here and here), where the CRA utilized section 231.2 to demand production of the account and transaction […]

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